Ng Sing King and Others v PSA International Pte Ltd and Others (No 2)

• Judge: MPH Rubin J
• Judgment Date: 18 January 2005
• Neutral Citation: [2005] SGHC 5
• Defendant Counsel: K Shanmugam SC, Stanley Lai and Esther Ling (Allen and Gledhill),Thio Shen Yi, Collin Seah, Karen Teo and Teo Ai Wen (TSMP Law Corporation)
• Subject Matter: Whether conduct of majority shareholders amounting to oppression,Whether costs should follow the event,Winding up,Whether just and equitable to wind up company,Whether court should order purchase of minority shareholders' shares by majority shareholders,Section 216 Companies Act (Cap 50, 1994 Rev Ed),Loss of substratum of company,Costs,Oppression,Principles,Civil Procedure,Irretrievable breakdown in relationship amongst shareholders,Companies,Whether majority shareholders influencing board of directors to downsize company to facilitate pursuit of similar businesses with other companies,Court finding in favour of first and second defendants,Order 59 r 3 Rules of Court (Cap 322, R 5, 2004 Rev Ed),Whether majority shareholders influencing board of directors to terminate first and second plaintiffs' employment,Section 254(1)(i) Companies Act (Cap 50, 1994 Rev Ed),Whether majority shareholders involved in businesses in direct competition with company
• Published date: 27 January 2005
• Court: High Court (Singapore)
• Plaintiff Counsel: Andre Maniam, Melvin Chan and Jaclyn Neo (Wong Partnership)

18 January 2005 Judgment reserved.

MPH Rubin J:

1 There were two actions, Originating Summons No 1022 of 2002 and Winding Up Petition No 307 of 2003, concurrently heard before me. In the originating summons, the seven plaintiffs, who are minority shareholders of eLogicity International Pte Ltd (“eLogicity”), sought relief under s 216 of the Companies Act (Cap 50, 1994 Rev Ed), on the ground that the first and second defendants have conducted the affairs of eLogicity in an oppressive manner. The second defendant also petitioned for eLogicity to be wound up pursuant to s 254(1)(i) of the Companies Act.

Background facts

The parties

2 The plaintiffs are Ng Sing King, Lim Khoon Hock, Hong Jen Cien, Wong Ban Kwang, Ng Siew King, Lo Lain and P-Serv Pte Ltd. They collectively own 34.02% of eLogicity’s shares. The first defendant is PSA International Pte Ltd (“PSAI”), a wholly-owned subsidiary of PSA Corporation (“PSA”). The second defendant is P&O Australia Pty Ltd (“POAP”), which is owned by P&O Ports Ltd (“P&O”). PSAI and POAP hold 32.8% and 33.18% of eLogicity’s shares respectively. PSA and P&O were originally the third and fourth defendants in this originating summons. However, they were removed from these proceedings on 30 December 2002. I shall hereinafter refer to PSAI and POAP collectively as “the strategic shareholders” of eLogicity.

The company

3 The company, eLogicity, was incorporated in 1992, with the first plaintiff, Ng Sing King (“Ng”), being the majority shareholder. The company was originally engaged in providing contract research and development services. In 1997, eLogicity developed the “eSeal”. This was a wireless security device affixed onto cargo containers and designed to inform the container owner if the container had been tampered with. Thereafter, eLogicity concentrated on the provision of global “track and trace” solutions for the shipping logistics industry. This entailed tracing the movement of containers and vehicles by offering up-to-date information on their current location and condition.

4 In order to track any container, readers had to be installed at various key points along its route. When the container affixed with the eSeal passed any of these key points, the eSeal transmitted radio signals, which were picked up by the readers. The information was then uploaded onto eLogicity’s system or website and could be retrieved by interested parties. Other radio frequency identification (“RFID”) tags instead of the eSeal were utilised for the tracing of vehicles. The seals and tags were complemented by the use of “electronic data interchange” (“EDI”). EDI enabled the transmission of additional information from a port terminal to eLogicity’s servers. In order to physically install the readers and set up an EDI with a port terminal operator, eLogicity had to enter into a Terminal Access Agreement (“TAA”) with the port operator. In addition, eLogicity had to apply for radio licences in various countries before it could operate the eSeal and RFID tags.

5 In July 2000, Ng invited terminal operators, including PSA and P&O, to invest in eLogicity as shareholders. After much negotiation, PSA and P&O expressed interest in acquiring eLogicity’s shares through their subsidiaries, PSAI and POAP. Accordingly, the plaintiffs, who were the existing shareholders of eLogicity, entered into a Shareholders’ Agreement (“the Agreement”) with the strategic shareholders on 29 September 2000. PSAI invested approximately $15m, while POAP invested about $17m and US$1.2m. Under the Agreement, each of the three groups of shareholders was entitled to nominate three directors to eLogicity’s board of directors (“the Board”). The initial composition of the Board was as follows:

Shareholder group	Name of nominee director
PSAI	Kelvin Dee Latta (“Latta”)
	Robert Yap Min Choy (“Yap”)
	Henry Tan Kim Soon (“Tan”)
POAP	Andrew Burgess (“Burgess”)
	Colin John Childs (“Childs”)
	Joseph Corcoran (“Corcoran”)
Plaintiffs	Ng Sing King (“Ng”)
	Lim Khoon Hock (“Lim”)
	Hong Jen Cien (“Hong”)

Ng was both the chairman of the Board as well as the company’s Chief Executive Officer (“CEO”) until 12 April 2002. Burgess was replaced by Jonathan Ladd (“Ladd”) on or about 12 April 2001. Subsequently, Burgess was re-appointed as one of POAP’s nominee directors in place of Corcoran. A total of ten board meetings were held between November 2000 and March 2003. The shareholders also formed an Executive Committee to assist the management of the company.

The present proceedings

6 Although eLogicity, supported by two major shipping companies, had a promising business concept, it was mired in incessant disputes and differences over a plethora of issues. These squabbles culminated in the plaintiffs’ commencement of this originating summons on 24 July 2002, barely two years after the strategic shareholders’ investment in the company. This was followed by POAP’s filing of a petition to wind up the company on 15 December 2003. The proceedings before me spanned almost 30 days and the parties filed close to 10,000 pages of documents, which included extensive e-mail exchanges and various versions of the minutes of the Board meetings. In view of the numerous abbreviations and parties in this action, I have appended to my judgment a table listing the abbreviations in alphabetical order.

The pleadings in the originating summons

The plaintiffs’ claim in the originating summons

7 The plaintiffs initially filed the required affidavits in support of the originating summons. Subsequently, the parties were given directions to file pleadings pursuant to O 28 r 8 of the Rules of Court (Cap 322, R 5, 2004 Rev Ed). In the Statement of Claim, the plaintiffs prayed for the purchase of their shares by the strategic shareholders at a fair value, taking into account the effect of the oppressive and unfairly prejudicial conduct of the strategic shareholders, and without any discount arising from the fact that the plaintiffs’ shareholding in eLogicity was a minority shareholding in a private company.

8 The plaintiffs averred that the affairs of eLogicity were conducted in an oppressive manner, in disregard of their interests as members and shareholders of the company. In particular, they alleged that the strategic shareholders and their parent companies had planned to collaborate with eLogicity’s competitors to the exclusion of the plaintiffs, and had in fact been involved in matters that were in competition with eLogicity’s business. They claimed that the strategic shareholders sought to usurp the role of eLogicity’s management and to conduct the company’s affairs in complete disregard of the plaintiffs’ rights. Their final allegation was that the strategic shareholders sought to diminish the value of eLogicity and ultimately abandon it, in order to facilitate the pursuit of a similar business with other third parties, to the exclusion of the plaintiffs. The plaintiffs’ averments in support of these allegations were broadly categorised under three headings in the Statement of Claim, which I will now summarise in turn.

The strategic shareholders’ dealings with SAVI Technology Inc

9 SAVI Technology Inc (“SAVI”), an American company, was a competitor of eLogicity. The strategic shareholders and their parent companies had secretly negotiated with SAVI without informing the plaintiffs. When the plaintiffs asked for more information on the benefits of working with SAVI, the strategic shareholders refused to provide any information.

10 Moreover, the strategic shareholders sought to achieve their intended collaboration with SAVI by exercising their nominee directors’ powers and usurping the role of the management. They passed resolutions that purported to delegate to the strategic shareholders the power to pursue alliances or partnerships with SAVI, to the exclusion of the plaintiffs. They also attempted to pass a resolution for a strategic alliance with SAVI on terms which effectively compromised the rights and interests of the plaintiffs. In addition, the strategic shareholders terminated Ng’s and Lim’s employment, and their parent companies subsequently proceeded to collaborate with SAVI to eLogicity’s detriment.

Ladd’s conduct in respect of the Port Information Exchange/the new eModal

11 Next, the plaintiffs deposed that the strategic shareholders’ representatives became involved in matters that were in direct competition with eLogicity. Ng was informed that PSA, P&O, Hutchinson Ports and Logistics Information Network Enterprise (“HPH/LINE”), a wholly owned subsidiary of Hutchinson Ports, and Stevedoring Services of America (“SSA”) had formed the Port Information Exchange (“PIE”), an organisation that linked major terminal operators. POAP’s representatives had assured the plaintiffs in February 2001 that the PIE was “dead”, but it later appeared that this was not so. During this time, eLogicity was seeking to work with HPH/LINE and SSA. Ladd, who was a director nominated by POAP, was tasked with securing a TAA with SSA. However, SSA and HPH/LINE subsequently declined to work with eLogicity. The plaintiffs discovered that P&O, HPH/LINE and SSA were considering investing in a new “eModal” (which was akin to the PIE), and that Ladd was negotiating this deal on behalf of P&O.

12 The majority of eLogicity’s Board agreed to seek legal advice concerning Ladd’s actions. Drew & Napier LLC (“D&N”) was appointed for this purpose. In its report, D&N opined that there was a serious possibility that Ladd’s involvement in the new eModal amounted to a breach of his fiduciary duties to eLogicity. However, the report concluded that this breach did not cause any damage to eLogicity. The evidence suggested that Ladd did not influence HPH/LINE’s decision not to enter into a TAA with eLogicity.

Removal of Ng and Lim from management and the subsequent downsizing of the company

13 It was further alleged by the plaintiffs that the strategic shareholders proceeded to...